Triangle Petro: Zacks’ Bear of the Day Play

Triangle Petroleum Corp (TPLMSnapshot Report) missed both the Zacks Earnings and Revenue estimates with their Q1 16 results.  First, their RockPile segment saw Q/Q revenues drop 40% due to weak pricing.  Also, gross margins in the RockPile segment fell from 16% to 4% over the last two quarters.  Further, increased Capex was a big concern; $82 million in Q1, vs. an expected budget between $165-$195mm (42% of the entire Capex budget was spent in one quarter), making many believe that management will be revising Capex up, sometime this year.  Due to these issues, Triangle Petroleum is the Zacks Bear of the Day.

This Zacks Rank #5 (Strong Sell) company is an independent energy holding company with three principal lines of business: oil and natural gas exploration, development, and production; oilfield services; and midstream services. The company is broken into two principally wholly-owned subsidiaries and their joint venture; Triangle USA Petroleum Corp conducts exploration and production operations by acquiring and developing unconventional oil shale and natural gas resources; RockPile Energy Services is a provider of hydraulic pressure pumping and complementary services; Caliber Midstream Partners is a 28.3% joint venture with First Reserve Energy Infrastructure Fund.

In their most recent earnings report, the company missed the Zacks Earnings estimate by -125%, and missed the Zacks Revenue estimate by -14.66%.  This was the first time in 5 quarters that the company missed on both the top and bottom lines.  Further, revenues in the RockPile segment declined 40% Q/Q, and saw margins contract significantly.

Estimates Graph

As you can see in the Price and Consensus graph below, expectations have massively decreased.

Over the past 60 days, estimates have declined for Q2 16, Q3 16, FY 16 and FY 17; Q2 16 plunged from -$0.02 to -$0.14, Q3 16 fell from $0.00 to -$0.14, FY 16 dropped from -$0.09 to -$0.53, FY 17 slipped from -$0.24 to -$0.66.

Bottom Line

Increasing costs, and decreasing revenues is not a recipe for success in any business, but that is what is facing Triangle Petroleum.  While the company is taking measures to shore up these deficiencies, it will take a bit of time to implement.

If you are inclined to invest in the Oil & Gas International Specialty segment, you should consider looking at BG Group (BRGYYSnapshot Report), or Energy XXI (EXXISnapshot Report); both carry a Zacks Rank #3 (Hold).

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